LONDON, April 25 (Reuters) - Deutsche Bank may end up resigning its seat on the London gold fix rather than selling it as U.S. lawsuits alleging price rigging against the five banks that set the benchmark deter potential buyers, industry sources said.

At the time the initial suits were filed, Societe Generale called the claims “unsubstantiated”, and Deutsche Bank described them as “without merit”.

Barclays and HSBC have repeatedly declined to comment, while Bank of Nova Scotia has not responded to requests by Reuters for comment.

The court cases are complicating negotiations that Deutsche Bank had started with potential buyers after it announced in January it was putting its seat at the fix up for sale, a source with knowledge of the matter said.

“Which institution would want to buy the Deutsche seat knowing about all these lawsuits for manipulation?” the source said.

“Nobody will buy it until the cases are resolved, as these may mean inheriting a reputational risk that in the current regulatory environment, frankly, nobody wants.”

The gold fix, a benchmark widely used across the industry, is set twice a day by the five banks, which get together over the telephone to work out a standard price for the metal based on transactions between their clients.

Industry sources said only a handful of candidates had emerged to buy Deutsche’s seat, mostly Asian banks looking to raise their profile in the London market.

South Africa’s Standard Bank, in conjunction with China’s ICBC, at one stage was indicated as being in prime position to buy the seat, but its interest seems to have gone cold, a second source said.

“It doesn’t look like that is going to result in anything concrete.”

Deutsche Bank and Standard Bank declined to comment for this story.

CLEAN SLATE

It is unlikely that any residual liability would be passed on to a buyer, because the banks are named individually in the U.S. cases, but any potential bidder still will want to start with a clean slate, the sources said.

“It seems unlikely that an independent, arm‘s-length buyer of a seat on this market would inherit the liabilities of a previous holder, although this would depend not only on market rules but also on the law applicable to any claims made,” Robert Finney, a partner at law firm Holman Fenwick Willan, said.

Increased regulatory scrutiny, on the other hand, is “going to be significantly disruptive to the London fix process”, said Reynolds Porter Chamberlain’s head of financial disputes, Tom Hibbert.

The gold fix, along with other commodity benchmarks, has come under growing scrutiny by regulators including Germany’s Bafin, Britain’s Financial Conduct Authority and the U.S. Commodity Futures Trading Commission since the Libor manipulation case last year.

The pressure stemming from expected regulatory changes has also raised questions on whether other banks currently sitting at the gold fixing table may decide to resign.

Barclays on Tuesday said it would keep its gold-trading business while hiving off most of its global commodities operations and that its gold fixing activity “was business as usual for now”.

JULY DEADLINE

After the Libor (London Interbank Offered Rate) scandal, the International Organisation of Securities Commissions - a global umbrella group for market regulators - detailed a series of principles with which any institution providing a financial benchmark should comply. It set a deadline of July 2014.

The Gold Fixing Company, which represents banks involved in price settlement, is undertaking a review to ensure the gold fix complies with those benchmark principles.

“(For Libor and foreign-exchange litigation) people would quite like to wait and see what the regulators find, because they obviously will have got a very large amount of documentary material and will make reference to it in their decision notices,” Hibbert said.

“That’s obviously missing here, because the regulators have not issued a formal investigation in relation to the gold price, although there is a lot of noise about it,” he added.

If no buyer is found, fixing could potentially continue with four members. Deutsche is also resigning from silver fixing, leaving only Bank of Nova Scotia and HSBC involved in that process.

The sources suggested a deadline either for a deal or for Deutsche Bank to resign would come within months.

“From a risk-management point of view, if Deutsche Bank wants to get out of the business, it may just retire, and then the Gold Fixing Company will have to figure out how to fill the spot,” said Axel Merk, president and chief investment officer of California-based Merk Funds. (Additional reporting by Frank Tang in New York; Editing by Veronica Brown and Dale Hudson)